Opinion: B.C.’s share issue influenced dismantling of communism

It will come as a shock to most British Columbians that the late former British Columbia Premier Bill Bennett’s legacy included influencing the dismantling of the Communist world’s economic structure when those regimes collapsed in Eastern Europe and the Soviet Union in 1989 and the early 1990s. And each and every one of us who received five free BCRIC shares in 1979 was unknowingly part of this little recognized experiment in political economy.

It will come as a shock to most British Columbians that the late former British Columbia Premier Bill Bennett’s legacy included influencing the dismantling of the Communist world’s economic structure when those regimes collapsed in Eastern Europe and the Soviet Union in 1989 and the early 1990s. And each and every one of us who received five free BCRIC shares in 1979 was unknowingly part of this little recognized experiment in political economy.

I learned of this intriguing circumstance in a remarkable way in 1993 in Prague, Czech Republic, when I met with the then-leader of the opposition in that country’s newly democratic parliament. When he found out I was from B.C., Milos Zeman, who is now the President of the Czech Republic, walked into a room in the parliament buildings and before even sitting down announced that he had an important question for me as I came from British Columbia. He then informed me that the then prime minister, Vaclav Klaus, had repeatedly told the Czech Parliament that the precedent for selling off the Czech state-owned industries by way of a share giveaway to all citizens came from British Columbia. After a few moments of total perplexity, not knowing quite what he was talking about, it then hit me like a ton of bricks. I suggested that he may have been referring to the B.C. government’s distribution of five free BCRIC shares to every resident of the province in 1979.

“Exactly!”, Mr. Zeman acknowledged and then forcefully asked me, “Tell me what really happened?” I sadly had to inform him that the share certificates were now adorning peoples’ living rooms as wall paper and were totally worthless.

I have since learned that the BCRIC precedent was studied and at least partially applied throughout Eastern Europe and the Soviet Union, as some 14 former Communist countries adopted mass privatization programs to dismantle their state-owned economies soon after the collapse of the Eastern European and Soviet Communist world between 1989 and 1993.

Citizens of those countries received shares that could supposedly be traded on public stock exchanges in an effort to transform their countries into market economies. To the best of my knowledge, most of these shareholders suffered the same fate we experienced in B.C. with what became worthless holdings.

According to World Bank documents, the BCRIC share giveaway was the first recorded free transfer of equity in government-owned firms to the public anywhere in the world.

What were the circumstances that resulted in Bill Bennett and his Social Credit government ending up with this fascinating place in history? The genesis of this bit of history began with the defeat of the NDP by Social Credit in 1975. The Bennett administration inherited some resource companies, some troubled, that the NDP had acquired during their three years in office. The Bennett government wanted to divest itself of some resource companies by packaging them in an umbrella corporation, the British Columbia Resource Investment Corporation (BCRIC), and then, in a groundbreaking initiative, issued five free BRIC shares to every British Columbian. The idea was not new, but the implementation of the idea was precedent setting.

Bennett was very much influenced by the local conservative and libertarian Fraser Institute that had been established the year before he took office. And they, in turn, were very influenced by a group of right-wing free market economists from the University of Chicago, most notably the renowned Milton Friedman, who the director of the Fraser Institute referred to in 1992 as “the greatest economist of our time and perhaps the greatest economist of the century.”

Milton Friedman extolled the virtues of a free-market economy and had been espousing blueprints as to how governments could conveniently dismantle state-owned interests such as crown corporations.

Two years before Bennett and his government bought into the BCRIC share giveaway program Friedman wrote that rather than auctioning off government nationalized industries, it “made a great deal of sense ….to give it away by giving every citizen in the country a share in it.”

After all, he reasoned that as crown corporations were the property of all the citizens, “Well, then, why not give each citizen his piece”.

After the BCRIC experiment, Friedman and other conservative American economists flogged the B.C. experience as a worldwide solution for government divestiture of government assets, both in western and Communist political regimes. Friedman was particularly influential with U.S. President Ronald Reagan and British Prime Minister Margaret Thatcher who had come into office in 1979, the year of the B.C. share giveaway. The Thatcher government was looking for a modus operandi to sell off crown assets. The Financial Secretary to the Treasury in a briefing document to Thatcher to prepare her for a 1980 meeting with Friedman stated that the economist felt that western countries were moving “too slowly and unimaginatively” over denationalization. Furthermore, he wrote that Friedman favoured the “British Columbia solution” wherein crown corporations were grouped into a holding corporation following which the stock in that company was then distributed to the entire population.

When an economist of Friedman’s renown was preaching the “B.C. solution” to world leaders, one can appreciate why these ideas were adopted by the newly established capitalist regimes of the former Communist world.

And therein lies the genesis of the world’s first share giveaway of publicly owned assets to its citizens, which 10 years later influenced the dismantling of the Communist state-owned infrastructure. I doubt anyone, most of all Premier Bennett, appreciated at the time that his government and all of us as BCRIC shareholders were unknowingly the architects influencing what would follow with the collapse of the Communist world.

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